PracticeConsultingRover losses row.

Rover losses row.

German accounting rules exacerbated UK car manufacturer's losses by

Rover accounts drawn up according to UK accounting rules show the car manufacturer lost considerably less in the lead up to last week’s controversial sale than the figure reported in BMW’s accounts. The figures shows that for the year ending December 1998, Rover lost around #160m less than that stated in accounts drawn up under harsher German accounting standards. According to UK accounts, Rover made losses of #509m in 1998. But BMW accounts show the company lost #670m. As morale plummeted at Rover’s Longbridge works following the threat of thousands of job losses as a result of the sale to venture capital company Alchemy, a spokesman said the trend of lower losses in the company’s UK accounts continued into 1999. Last year, when controversy over Rover first appeared, Accountancy Age revealed the discrepancy between the two sets of accounts. An analysis of four years’ of figures, from 1994 to 1997, revealed Rover had actually made a profit of #147m according to UK rules while the German books stated a loss of #363m. Under German accounting policies investments are depreciated faster, there are more possibilities for making provisions and there are different rules for the valuation of stocks. BMW was expected to move to International Accounting Standards which may have improved the position of Rover, but BMW this week refused to comment on which accounting standards are now being used. Reading University Professor Chris Nobes, a member of the International Accounting Standards committee, said the problem was not unique to Rover. ‘Normal German practice is more conservative than Britain’s,’ he added. Chemical companies like Bayer and Hoechst, and Deutsche Bank, have moved away from German standards but the number switching is small. Lufthansa and Volkswagen use German standards. Alchemy, the buyer of Rover, is certain to use UK accounting standards when dealing with its new purchase.

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